Shoresh Institution

The Socioeconomic Threat facing Israel

Israel’s national pivot in the 1970s

In the 1970s, Israel changed its national priorities. It shifted from a fast growing trajectory to a new, very steady, but substantially slower growth path. Today, the labor productivity gap between the average of the leading G7 countries and Israel is three times the gap that existed in the mid-1970s.

In the 1950s 1960s, Israel grew at a phenomenal pace. South Korea and Taiwan, with just a quarter of Israel’s living standards in 1950 – were among the few nations that kept pace, and income gaps remained relatively unchanged in 1972. After 1973, Israel changed its national priorities while South Korea and Taiwan stayed on track – and overtook Israel.

A growing dependence on a limited skilled workforce

Only 10% of Israelis work in hi-tech. Their productivity is 25% above the OECD average, and they are responsible for half of Israel’s exports. Because education and other vital infrastructures have undergone rampant neglect, the average productivity of all remaining Israelis is 40% below the OECD average.

Poorly skilled and educated individuals earn very little. As a result, one-half of Israelis are so poor that they do not reach the bottom rung of the income tax ladder, and they pay no income tax. 93% of all Israel’s income tax revenue is shouldered by just 20% of the population.

Israel’s hi-tech professionals keep its economy in the developed world. Its physicians keep the country’s healthcare system in the developed world. Israel’s universities are responsible for educating these highly trained experts. In a nation of ten million, these professionals total fewer than 300,000 individuals. If a critical mass of these people decide to leave, Israel will enter a spiral of collapse.

Why are so few skilled individuals shouldering the burden?

Israel’s average educational achievement over the past two decades in core subjects is below nearly all OECD countries. Secular school schools score below 57% of the OECD countries, religious (non-Haredi) stream scores are below 80% of the OECD countries and Haredi boys neither study the material nor take the exams. Arab-speaking Israelis score below many third-world countries.

Roughly half of Israel’s children (including children in the country’s geographic and social peripheries) receive a third world education – and they belong to the fastest-growing population groups. As adults, they will only be able to support a third-world economy needed to maintain first-world healthcare, welfare and army. Such an Israel will not become a third-world nation. It simply will not be.

Although increasing numbers of Haredim are deciding to attend college, most are unable to overcome the extremely poor education that they receive as children and drop out. Despite a slight increase in recent years among Haredi women, the share of Haredi men and women with academic degrees has remained very low and relatively stable over the past two decades.

Israel’s demographic direction

The Haredim, who deprive their boys of a core education that would provide them with opportunities later in life, have roughly three times as many children per family than do other population groups. Consequently, their share in Israel’s overall population is growing exponentially.

Haredim’s share in Israel’s population is doubling every 25 years – i.e. every generation. For example, Haredim comprise 6% of the 50-54 year old grandparents while their grandchildren are already 26% of the 0-4 year olds. Tomorrow, these grandchildren will bear their share of the national economic and defense burdens – or not. If not, what then?

Municipal spirals of collapse

In 1995, the Central Bureau of Statistics placed Jerusalem in a middle socioeconomic classification. Within two and a half decades, it had fallen by three socioeconomic classifications, from classification 5 to classification 2. The uniqueness of the Jerusalem experience is shown in a comparison with three other large Israeli cities.

The share of secular Jewish pupils in Jerusalem’s primary schools collapsed from 33 percent to 9 percent in just over three decades. Religious (non-Haredi) schools also exhibited a drop in their relative share to 11 percent, though that fall is not close to the reduction in the secular share. As of 2021, nearly half of the city’s primary school pupils are Haredim (46 percent) while a third are Arab pupils.

The four Israeli towns that fell the farthest in Israel’s socioeconomic classifications over the past three decades are Jerusalem, Beit Shemesh, Arad and Givat Zeev – towns with rapidly shrinking secular populations. Jerusalem and Beit Shemesh fell from classification 5 to 2 while Arad dropped from 6 to 3 and Givat Zeev fell from 8 to 5.

The share of secular primary school children in Jerusalem plummeted from 33% in 1988 to 9% in 2021. In 2000, Arad and Givat Zeev had large secular majorities. Within just two and a half decades, however, Haredi children became the overwhelming majority in each of these towns, while the secular share simply collapsed.

Excerpts from 2024 warning letter signed by 130 of Israel’s leading economists

“The demographic and economic processes that the city of Jerusalem has undergone in recent decades – its rapid decline in socioeconomic indicators and its increasing abandonment by large segments of its secular population – clearly illustrate this spiral of collapse phenomenon and the dangers facing the entire State of Israel.”

“Jerusalem has Israel to support it. But Israel has only itself.”

“The danger is clear, and in our estimation, the probability of its realization is very high... This is a real alarm. History will not forgive the State’s leaders in the present and future – from all ends of the political spectrum – if they stand by.”

Emigration

Net migration out of Israel has been occurring at a steady pace for decades, albeit in relatively small numbers. Over the past two decades, the number of Israeli physicians practicing in other OECD countries has more than doubled in relation to those still practicing in Israel.

Since the government judicial coup attempt began in 2023, there has been a pronounced surge in the number of native-born Israelis leaving the country. This surge became even more pronounced after the beginning of the October 7 War.

The Israel 2.0 Roadmap for avoiding a national spiral of collapse

Ensuring Israel’s future

Four-point Shoresh Institution framework

Objective: Returning Israel to a sustainable long run trajectory

Ensuring faster economic growth, lower poverty, and Israel’s ability to defend itself

1. Close the four-stream education system – open one education system for all

Basic tenets of such an overhaul need to include:

Significant upgrade of compulsory identical core curriculum (allowing remaining curriculum to reflect local parental preferences). Funding only fully compliant schools.
A complete prohibition on the involvement of political parties in educational content.
Fundamental change in the way that teachers are chosen, taught and compensated.
Structural transformation in education system’s operation, management and oversight.

2. Overhauling governmental budgetary priorities

including:

Terminate benefits that incentivize non-work lifestyles.
Full budgetary transparency enabling the public to see Israel’s actual national priorities – including who the government supports and how much they receive.

Objective: Safeguarding the above changes

Ensuring faster economic growth, lower poverty, and Israel’s ability to defend itself

3. Electoral reform

Creation of effective checks and balances between the three branches of government.
Cabinet ministers with understanding and expertise in their ministry’s realm within an executive branch able to implement its decisions and enforce the law.

4. Drafting and ratifying a constitution

Set in stone national foundations that will protect the country and the basic rights of its citizens, making it difficult for anyone to erode these foundations in the future.

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Israel's moment of truth

Showing root (shoresh) socioeconomic-demographic challenges to top Israeli leaders and presenting them with the four-point Shoresh Institution framework (see below) that they can unite around to ensure Israel’s future

Naftali Bennett, former Prime Minister, summer of 2024

Benny Gantz, Chairman, HaMahane HaMamlakhti Party, summer of 2024

Isaac Herzog, President of Israel, summer of 2024

Gideon Saar, Chairman, Tikvah Hadasha Party, summer of 2024

Yair Lapid, Chairman, Yesh Atid Party, Opposition Leader and former Prime Minister, summer of 2024

Yair Golan, Chairman, Democrats Party, (merger of Labor and Meretz parties), summer of 2024

Avigdor Liberman, Chairman, Yisrael Beiteinu, summer of 2024

Gadi Eisenkot and Hili Tropper, leaders in HaMahane HaMamlakhti Party, summer of 2024

Naftali Bennett

former Prime Minister

summer of 2024

Benny Gantz

Chairman, HaMahane HaMamlakhti Party

summer of 2024

Isaac Herzog

President of Israel

summer of 2024

Gideon Saar

Chairman, Tikvah Hadasha Party

summer of 2024

Yair Lapid

Chairman, Yesh Atid Party

Opposition Leader and former Prime Minister

summer of 2024

Yair Golan

Chairman, Democrats Party

(merger of Labor and Meretz parties)

summer of 2024

Avigdor Liberman

Chairman, Yisrael Beiteinu

summer of 2024

Gadi Eisenkot and Hili Tropper

leaders in HaMahane HaMamlakhti Party

summer of 2024

briefing in Knesset

summer of 2024

Featured Publications

Housing prices rose by 130%, incomes by only 45%

Beyond the Shortage: A Structural Perspective on Israel’s Housing Market

Yael Mishly
April 2026

Israel’s housing crisis is reflected not only in a relative shortage of housing units but also in structural failures: too few small apartments are being built to match the changing composition of households, and the rental market – on which more than a third of households now rely – is based on private landlords and short-term leases. The result is instability and a heavy housing burden, comprising over 30% of household disposable income, according to the OECD definition. The findings point to a need for targeted reforms, creating a more diverse mix of dwelling sizes, developing long-term institutional rental housing, and aligning local authorities’ fiscal incentives with national goals.

Income inequality has declined – but gaps in food and housing expendiures are large, and have risen

Consumption Inequality in Israel

Yoav Tuvia
March 2026

While income inequality has been on a downward trend over the past two decades, there are still large gaps in Israel between the consumption levels of households at different income levels and from different population groups. This study examines inequality in Israel’s standard of living by analyzing total household consumption patterns during the years 2003-2018. Among the findings: low-income households consume less food per capita; their food basket is less varied; their housing density is higher; and their mobility is constrained by the cost of vehicle ownership. Similar – and even larger – gaps were found when comparing Arab-Israeli households with Jewish households that share similar characteristics. By contrast, home ownership rates among Haredi (ultra-Orthodox) Jewish households is far higher than that of the other population groups – even when comparing households with similar characteristics.

Our cutting-edge findings, presented in easy-to-understand language and format – on Israel’s core socioeconomic challenges are utilized and cited by Israel’s leading policy-makers from across the political spectrum and in leading media outlets in Israel and abroad.

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Research for the Future

The Socioeconomic Threat facing Israel

Israel’s national pivot in the 1970s

A growing dependence on a limited skilled workforce

Why are so few skilled individuals shouldering the burden?

Israel’s demographic direction

Municipal spirals of collapse

Excerpts from 2024 warning letter signed by 130 of Israel’s leading economists

“Jerusalem has Israel to support it. But Israel has only itself.”

“The danger is clear, and in our estimation, the probability of its realization is very high... This is a real alarm. History will not forgive the State’s leaders in the present and future – from all ends of the political spectrum – if they stand by.”

Emigration

The Israel 2.0 Roadmap for avoiding a national spiral of collapse

Ensuring Israel’s future

Four-point Shoresh Institution framework

1. Close the four-stream education system – open one education system for all

2. Overhauling governmental budgetary priorities

3. Electoral reform

4. Drafting and ratifying a constitution

Israel's moment of truth

Showing root (shoresh) socioeconomic-demographic challenges to top Israeli leaders and presenting them with the four-point Shoresh Institution framework (see below) that they can unite around to ensure Israel’s future

Featured Publications

Housing prices rose by 130%, incomes by only 45%

Income inequality has declined – but gaps in food and housing expendiures are large, and have risen

Shoresh

Research

Shoresh

Team

Shoresh

Impact

Be in the know

Support Our Work

Featured Video

For more on Israel’s internal root (shoresh) existential challenges, read our publications, watch our videos – and help spread the word.

Follow us on Facebook

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The Socioeconomic Threat facing Israel

Israel’s national pivot in the 1970s

A growing dependence on a limited skilled workforce

Why are so few skilled individuals shouldering the burden?

Israel’s demographic direction

Municipal spirals of collapse

Excerpts from 2024 warning letter signed by 130 of Israel’s leading economists

“Jerusalem has Israel to support it. But Israel has only itself.”

“The danger is clear, and in our estimation, the probability of its realization is very high... This is a real alarm. History will not forgive the State’s leaders in the present and future – from all ends of the political spectrum – if they stand by.”

Emigration

The Israel 2.0 Roadmap for avoiding a national spiral of collapse

Ensuring Israel’s future

Four-point Shoresh Institution framework

1. Close the four-stream education system – open one education system for all

2. Overhauling governmental budgetary priorities

3. Electoral reform

4. Drafting and ratifying a constitution

Israel's moment of truth

Showing root (shoresh) socioeconomic-demographic challenges to top Israeli leaders and presenting them with the four-point Shoresh Institution framework (see below) that they can unite around to ensure Israel’s future

Featured Publications

Housing prices rose by 130%, incomes by only 45%

Income inequality has declined – but gaps in food and housing expendiures are large, and have risen

Shoresh

Research

Shoresh

Team

Shoresh

Impact

Be in the know

Support Our Work

Featured Video

For more on Israel’s internal root (shoresh) existential challenges, read our publications, watch our videos – and help spread the word.

Follow us on Facebook

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